Australia’s most enduring conspiracy theories surround the inexplicable disappearance of a serving prime minister, Harold Holt, while swimming in 1967. The most elaborate theory holds that he was whisked away by a submarine sent by China, for whom he was ostensibly a spy. An alternative proposition is that the Central Intelligence Agency, concerned that Australia might pull support for the United States-led Vietnam War, had the prime minister killed.

While fantastical, these theories point to some deeply ingrained Australian anxieties about the intentions of larger powers toward their nation. And, indeed, Canberra’s present day leader, Malcolm Turnbull, has recently faced a very real challenge involving allegations of Chinese espionage (among other subversive influences) and threats to US interests in Asia. These could dramatically complicate the nation’s—and region’s—strategic calculus in years to come.

At the start of June, a joint investigation by Australia’s national broadcaster and several newspaper journalists outlined what they claimed was “a concerted campaign by the Chinese government and its proxies to infiltrate the Australian political process to promote its own interests.” Beijing has since pushed back against the allegations, with its ambassador to Canberra, Cheng Jingye, saying they are fabricated and designed to “instigate China panic.”

Putting questions of veracity aside, Cheng may have undersold the level of concern: Observers in Australia and beyond fear that China’s efforts are part of a much wider and more insidious project by illiberal regimes to undermine Western democracies. Research from the US-based National Endowment for Democracy has, for example, noted how hacking and misinformation campaigns run by Russia, China, and others have increasingly gone hand-in-hand with their accumulation of more hard power, as well at their political realignment through blocs such as the Shanghai Cooperation Organisation.

Former US intelligence chief James Clapper noted parallels to Moscow’s involvement in American politics when speaking on Australia’s China troubles. While saying that he viewed China “more benignly” than he did Russia, he encouraged Australia to engage its great northern neighbor “with both caution and confidence, eyes wide open, weighing its strategic and economic interests, never forgetting the importance of its democratic institutions and values that you share with us [the US].”

Even before the media revelations, Turnbull had suggested a basic agreement with those sentiments, in his keynote address to Singapore’s Shangri-La security dialogue on June 2. Here he proclaimed that China will “best succeed by respecting the sovereignty of others and in so doing build a reservoir of trust and cooperation with its neighbors.” The Australian population is now likely to apply a sterner pressure test to the bilateral relationship, as the perceived China threat turns from security to their social traditions and political institutions.

The recent allegations, indeed, include instances of direct Chinese Communist Party (CCP) influence on Chinese-language media and Chinese students in Australia (of which there are some 130,000), with the aim of pushing pro-Beijing messages. Of more direct concern for Australia’s sovereignty were details of major funding commitments to its political parties from Beijing-linked sources, often with the expectation of influence. This attention centered on Chinese-born, Australian-based billionaires Huang Xiangmo and Chau Chak Wing, the latter of whom was also implicated, though not criminally, in a 2015 bribery scandal involving former United Nations General Assembly President John Ashe.

Senior Australian politicians have in turn suffered from association with the two men. Senator Sam Dastyari was demoted in late 2016 after taking campaign money from Huang and subsequently adopting pro-Beijing talking points on the South China Sea (these opinions contradicted the positions of Canberra, his own Labor party, and, the US, whose officials were at the time encouraging Australia to join in “freedom of navigation” operations to challenge Beijing’s assertiveness). Former Australian Trade Minister Andrew Robb has also been censured for taking Chinese donations, including on the day he shepherded through an Australia-China free trade agreement.

Upon leaving office last year, Robb subsequently took a lucrative consultancy role with Chinese firm Landbridge, which was already generating fierce debate over its 99-year lease on the port of Darwin—a number of Australian national security analysts have criticized the deal, even as it was cleared by the country’s Department of Defence. The White House, in turn, has expressed concern that China’s Darwin access “could facilitate intelligence collection on U.S. and Australian military forces stationed nearby.” (The forces referred to are rotated through the Asia-facing city for six-month intervals under a Barack Obama-era deal. US officials have, in the past, also discussed sending long-range bombers to Darwin, again to counter China.)

Complying with Clapper’s advice for Australia to carefully weigh its strategic and economic interests, Turnbull has ordered a “major inquiry” into anti-espionage measures and foreign interference laws. He faces particular pressure over the continued lawful ability of individuals and groups linked to foreign governments to directly donate to Australian political campaigns—a situation that few developed countries, at least officially, tolerate.

Beyond this, Canberra’s decision-making becomes much more complex. To reiterate, China is by far Australia’s largest trading partner, with total exports and imports between the countries worth about AUD$150 billion in 2015-16. This more than doubles the AUD$69.2 billion value of the US-Australian trading relationship and has been critical to Australia this month recording what is said to be the longest run of uninterrupted growth in the developed world, though the figure that tipped it past the previous holder of that record, the Netherlands, was just 0.3%.

Concerns about losing a high standard of living as economic activity slows have driven recent Australian calls for deepening and broadening the Chinese bilateral relationship. The international student business is one element of this—it constitutes a vital economic complement to Chinese hunger for Australian iron ore, natural gas, and other natural resources tied to commodity market fluctuations; it also expands person-to-person links between the two countries, particularly as Canberra’s skills-based migration strategy makes it far easier for these students to remain after graduating than does the system in the US, which is its biggest competitor in this market.

This month’s media investigation challenges some of those overtures, though the logic of these have always been doubted to some extent. China has, for example, traditionally been far more prominent on Australian trade ledgers than on those for foreign direct investment, which continue to be dominated by the US, United Kingdom, and other traditional economic partners. Part of the reason has been lingering public doubt around the benevolence of the Asian country’s ownership of local assets. While the Darwin port deal was a victory for Beijing, sovereignty and security concerns eventually won out in cases such as the proposed Chinese purchase of a major electricity generator and agricultural holdings worth approximately 1% of the Australian landmass.

Considerations of national interest are likely to be weighed even more assiduously in the wake of the recent revelations. As recent back-downs by Southeast Asian nations on their territorial claims in the South China Sea have shown, however, few governments can resist the economic lure of China, even when the country encroaches on their sovereignty elsewhere. If anything, Australia’s inability to resist is more pronounced than most: With a land area roughly the size of the contiguous US, a massive resource base, but a population lower than that of the state of Texas, it is exceedingly reliant on foreign demand and investment to reach its economic potential.

Further complicating matters, in the age of President Donald Trump Australian leaders are simultaneously facing the same doubts as all those who traditionally turn to the US for some aspect of their wellbeing. The relationship between the typically staunch allies was first thrown into doubt when Trump hung up on Turnbull in their first ever conversation. Even with a number of fence-mending efforts, the US position in the country’s neighborhood is far from clear.

On the economic front, Australian decision-makers evidently see little choice but to move ahead with reigniting regional activity through more open trading mechanisms that exclude the US. Canberra has, for example, spearheaded the resurrection of a new version of the Trans-Pacific Partnership (TPP) that Trump abandoned. It is also reportedly open to including China in the deal at a later date. This would thus remove all trace of the TPP’s previous Washington-imbued strategic logic of containing that country’s rise.

On security, Australian military planners will face increasing pressure if Trump continues to exhibit an apparent incoherence in managing the Asia-Pacific region’s fragile strategic environment, particularly in terms of winning domestic support for continued engagement in American-led efforts. (Despite the long closeness of the countries’ militaries, this is never a given, as the origins of the conspiracy around the CIA’s involvement in former Prime Minister Holt’s death might attest.)

Trump appears to have been silent on his commitment to the ANZUS mutual defense treaty including the US and Australia, possibly out of ignorance of its very existence. Yet his continued changes of opinion on NATO’s similarly designed Article 5 have caused concern in Australia, particularly as that arrangement shares a history with ANZUS of having only been invoked in service of US security (in both cases after the September 11 terrorist attacks).

Before Trump, there were much clearer battle lines between Australians who argued for a closer security relationship with China and other Asian countries and those who opted for safeguarding the US alliance. The recent allegations of Chinese influence-seeking have caused further complications. Australia’s own experience with foreign interference does not appear to have risen to the highest levels of government, as in the US, though Beijing still seems set on subversively influencing the decisions of those individuals and groups it has targeted. Coupled with the threat of increasing economic insecurity, it is becoming ever harder for Australians to tell friend from foe.

While the strengthening of Xi’s influence has raised more questions than answers about China’s trajectory—particularly when considered alongside legendary figures in party history—there are some indicators.

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About the Global Observatory

The Global Observatory provides timely analysis on peace and security issues by experts, journalists, and policymakers. It is published by the International Peace Institute. The views expressed here represent those of the contributors and not IPI.

The International Peace Institute is an independent, international think tank located in New York, Vienna, and Manama, dedicated to the settlement and prevention of armed conflict.